Restraining Government in America and Around the World

More Much-Needed VAT Bashing

A former Governor of Delaware, Pete DuPont, explains that a value-added tax means bigger government and slower growth. This issue is very important since Obama clearly is trying to set the stage for imposing this European-style national sales tax in the United States:

The VAT has been in use in the European countries since the late 1960s, and has had a strong, negative economic influence. Before the European VATs were put into effect, the average EU tax burden was 28% of gross domestic product, compared with the 25% in the U.S. By 2006 with the VATs EU average tax burden was 40% compared with 28% in America. Average European government spending was about 30% of GDP when the VATs were instituted in the late 1960s. Fast forward to today, and we see European government spending has grown more than 50% and now hits 47% of GDP. And European government debt in 2005 was 50% of GDP, compared with under 40% in America. Perhaps most important, bigger government spending and higher taxes have radically reduced job growth in Europe. Between 1982 and 2007, Europe created fewer than 10 million new jobs, vs. 45 million in the U.S. Our economic growth was more then one-third faster. The European Union now requires all member nations to have a minimum VAT of 15%–more or less the equivalent of Congress telling each of our 50 states how high their taxes must be. So has the VAT replaced some of the income tax in Europe? Absolutely not, nor has it reduced the income tax rates. The average VAT rate there is just under 20%, and the EU’s top income tax rates average about 46%. …What the VAT really does, as we have seen in Europe, is to do away with government spending controls. So if enacted by the Congress, higher taxes, bigger government, lower economic growth and fewer jobs will be the result, and all of us will soon be living in a new and much less successful America.

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When you think that after 30 years of 2% growth you end up only ½ as wealthy as 30 years at 4.5% growth, you realize that the welfare state is not that compassionate, after all. And that is the effect after only 30 years.